UK GDP still slumping in early 2009
Simon Ward
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Services sector output data released today confirm that the economy continued to contract rapidly in early 2009. A monthly GDP estimate based on services and industrial output fell a further 0.6% in January, to stand 1.4% below its fourth-quarter average – see first chart. Monthly GDP has now declined by 4.2% from its peak last April.
The January result suggests GDP will fall by more in the first quarter than implied by the central projection in the Bank of England’s February Inflation Report – second chart.
The GDP decline should slow as the recent big drag from destocking abates. More promising monetary trends, if sustained, warrant hopes of a recovery in GDP from late 2009, though probably from a significantly lower level than implied by the Bank of England’s central projection.
The current recession could yet prove less severe than the catastrophic 1979-81 downturn. GDP would have to fall a further 2.4% from its estimated January level to match the quarterly peak-to-trough decline in the early 1980s.
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